Watch

MyProactive

• News
• Topics
• Insights
• Companies
• Events

Sign in

EnergyOil & Gas

Ephrem Joseph

14:18 Tue 19 Oct 2021

Investor deep dive

FAR looks ahead to next African chapter as it steams ahead fully funded for its Bambo-1 well

read more >

viewFAR Ltd

(

ASX:FAR

)

FAR delivers strong September quarter, well-funded to advance West African oil & gas assets

The company is an independent oil and gas exploration and development company with high-value assets in West Africa and another in Australia.

Stena IceMax drillship scheduled for drilling at Bambo-1

FAR Ltd made strong progress during the September quarter and is well-funded with $64.7 million in cash at the end of the quarter as it advances its West African oil & gas portfolio.

After completing the sale of its offshore Senegal interests to Woodside Petroleum Limited (ASX:WPL) early this year, during the September quarter FAR rewarded shareholders with a capital return of A$0.80 per share from the sale proceeds.

The Africa-focused explorer continues with operations in preparation for drilling the Bambo-1 well offshore in The Gambia which is scheduled for spudding on November 13, 2021.

In Guinea-Bissau, PetroNor and FAR are undertaking a full review of a potential well location for the 2023 program with the Atum Prospect being the key drill target

Operational update at Bambo-1

Operational and logistics planning for the drilling of the Bambo-1 well in offshore Block A2 are well advanced with the Stena IceMax drillship scheduled to be in Las Palmas in late October to complete preparations and loading before mobilising to The Gambia.

FAR has contracted Exceed’s wells management team in Aberdeen to assist with the planning and execution of the well.

All other major contracts for the Bambo-1 drilling project have been awarded, including the contract with Stena for the IceMax and Schlumberger for bundled services.

Most long-lead materials and supplies have been received and are now at several locations in readiness for the operational phase of the project.

The shore base for the project is at Dakar, Senegal, and is now fully operational and ready to support the upcoming drilling activities.

Location of FAR’s Gambian blocks showing the Bambo-1 well location.

Financials at Bambo-1

The approved budget for the Bambo-1 well is US$51 million with US$11.4 million expended to date.

At 50% working interest, FAR’s share of the budgeted well cost is US$25.5 million with US$19.8 million yet to be spent.

FAR’s share of the forthcoming Bambo-1 well, contingency, success case options as well as expenditure on other assets and general administration costs will be funded from the remaining cash at hand.

The company estimates a year-end cash balance of approximately US$48 million with around US$6 million of Bambo-1 well costs to be paid in the March quarter of 2022.

Guinea-Bissau update

FAR is working with the operator, PetroNor, to finalise the 2022 work program and budget for approval and finalisation by the middle of December with FAR remaining open to farming down its interest before drilling a well.

The Sinapa (Block 2) and Esperança (Blocks 4A and 5A) licences in Guinea-Bissau have been extended for 3 years and are valid until October 2, 2023, during which time there is an obligation on the joint venture to drill an exploration well.

PetroNor and FAR are undertaking a full review of a potential well location for the 2023 program with the Atum Prospect as the key drill target.

The operator is also undertaking a review of the commerciality of the Sinapa discovery in the offshore shallow water.

Location of exploration permits offshore Guinea-Bissau

Australian interest

Through a wholly-owned subsidiary, Lightmark Enterprises Pty Ltd, FAR has a 100% interest in Petroleum Exploration Permit WA-458-P, which is in the prolific oil-producing Dampier Sub-basin along Australia’s North West Shelf.

Divestment activities for some or all of FAR’s interests in WA-458-P are ongoing. FAR has a 'drill or drop' obligation on the licence in early 2023.

Community and social projects

During the quarter, FAR, on behalf of The Gambian joint venture partners, continued works on the Ndemban Clinic which is being converted into a COVID-19 testing and treatment centre.

This project involves the repairs and refurbishment of several buildings and upgrades to the water supply system.

The project is now mostly completed, and the clinic has been put into service with final touches to the project will be completed in the next month.

Senegal RSSD Project sale

On January 19, 2021, the FAR group executed a sale and purchase agreement in relation to the Senegal RSSD asset.

As consideration for the sale, Woodside has paid FAR US$45 million and reimbursed FAR’s share of working capital for the RSSD Project from January 1, 2020, of about US$82 million, totalling US$126 million.

Following the completion of the sale to Woodside, FAR has no remaining interest in the RSSD licences offshore Senegal.

Pursuant to the sale and purchase agreement with Woodside, future payments to FAR of up to US$55 million are contingent on future oil price and timing of first oil which is targeted for 2023.

Capital return

FAR shares recommenced trading on the ASX on July 23 after completing the sale of the Senegal project as the company’s shares had been suspended since September 2020.

Following receipt of the RSSD sale funds on July 7, the FAR board completed a capital management review, and, taking into account committed exploration costs and working capital requirements, determined that the surplus, being about A$80 million, should be returned to shareholders by way of capital return.

Shareholders approved the capital return at a General Meeting on September 15 2021 and payment was made on September 28.

FAR then announced on October 13 that the ATO had published a class ruling confirming that no part of the capital return would be assessable as a dividend.

The ruling also confirms that qualifying shareholders will be entitled to treat any resulting capital gain as a discount capital gain and that certain foreign resident shareholders will be entitled to disregard any resulting capital gain or loss.

At the office

On July 1, FAR announced the resignation of non-executive chairman Nicholas Limb and non-executive director Reginald Nelson coincident with the appointment of Patrick O’Connor (non-executive chairman) and Robert Kaye SC (non-executive director) to the board.

Early in the quarter, the 1:100 share consolidation approved by shareholders at the company’s AGM was finalised with FAR now having 99,790,492 shares on issue.

The company has taken steps to reduce overheads and expects quarterly employment, administration and corporate costs going forward to average approximately US$1.25 million.